HARRISBURG -- It's still too early for Gov. Ed Rendell to say whether he will seek a general tax increase as he tries to erase a $3 billion budget deficit for fiscal 2008-09 and work out a $29 billion spending plan for 2009-10.

"At this stage nothing is off the table," he told a news conference yesterday. "Everything has to be looked at. We will do what is necessary."

He said his goal is to approve a new state budget without "a broad-based tax increase," such as raising the personal income tax rate of 3.07 percent or the state's sales tax, 6 percent in most counties but 7 percent in Allegheny and Philadelphia.

He said he will work with legislators for the next three weeks to resolve the fiscal problems and probably won't decide until late June whether an income tax increase is needed.

He said he will soon propose an additional "$400 million to $500 million" in spending cuts, which would lower his 2009-10 budget proposal.

But he said he wouldn't agree to severe cuts in education funding and economic development programs, as Republicans have proposed with their alternative $27.3 billion budget plan.

To pay for his version of the budget, Mr. Rendell already is seeking higher taxes on cigarettes, cigars and smokeless tobacco; eliminating a discount that retailers get for collecting sales taxes; and enacting a new $107 million tax on natural gas. He also wants to dip into two surplus accounts, taking $200 million from a fund used to keep doctors in the state and $375 million from an emergency account called the Rainy Day Fund.

He's also counting on about $2 billion in federal aid for low-income people on Medicaid health assistance.

But the budget deficit continues to get worse, and could hit $3.2 billion by the end of fiscal the fiscal year on June 30, so an income tax increase might be necessary.

Republican legislators have pledged to fight any tax increases. Their $27.3 million budget is balanced almost entirely through spending cuts.

The governor also didn't rule out unpaid furloughs or outright layoffs of several hundred state workers, if needed to get state spending under control.

"We will negotiate with all four legislative caucuses," he said.

The deadline for enacting a 2009-10 budget is July 1, but Mr. Rendell said "it's more important to get it done right than to get it on time," meaning budget talks might go into mid-July or later.